Six ex 100 opportunities

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
05 November 2015, 8:02 AM
Sectors Covered:
Equity Strategy and Quant

Our Research Team has identified a number of small to mid caps we believe to be of value. Many offer both yield and growth and are worthy of closer inspection.

Here are our six ex 100 stock picks for November:

360 Capital Industrial Fund (TIX)

360 Capital Industrial Fund owns a portfolio of 21 industrial assets across Australia.

Reasons to buy 360 Capital Industrial Fund

  • TIX's underlying portfolio is solid with a good lease expiry profile (c5 years), attractive +9% distribution yield (paid quarterly) and the stock is now trading at NTA.
  • TIX has moved to a 93% holding in ANI post its recent revised bid. 
  • The next round of revaluations (December), potential index inclusion (March) and increased scale should all be positive for the group.

We retain our Add recommendation for TIX with a share price target of A$2.69ps.

AP Eagers (APE)

AP Eagers operates a network of automotive dealerships across Eastern Australia.

Reasons to buy AP Eagers

  • APE aims to double its share of the new car market from approximately 5% to 10% - plenty of acquisition opportunities are available in a fragmented market. 
  • Higher margin used car sales are a key growth platform. APE aims to be an innovator/disruptor of the established sales models, with the shopping centre concept expected to launch in early CY16, replicating the success of US peers. 
  • APE enjoys ample cashflow and balance sheet capacity. We see material earnings upside over the coming 12+ months.

We retain our Add recommendation for APE with a share price target of A$11.16ps.

Corporate Travel Management (CTD)

CTD provides innovative and cost effective solutions to the corporate travel market globally.

Reasons to buy Corporate Travel Management

  • Domestic ticket prices are rising, CTD market share is rising and new acquisitions are performing well. CTD is a key benefactor of a falling AUD with about 50% of earnings now in USD. 
  • At its AGM, CTD reaffirmed it is tracking at the top end of its FY16 guidance for 30% EBITDA growth which we think is conservative. 
  • Further acquisitions in North America and the ability to win more regional and global clients and cross selling opportunities between regions all offer additional upside.

We retain our Add recommendation for CTD with a share price target of A$13.20ps.


GBST is a provider of fund administration and financial markets systems growing in popularity with major institutions.

Reasons to buy GBST

  • GBST has an impressive recent track record of new contract wins with major global institutions. 
  • Prospects look good for some existing clients to upgrade from single to multiple applications. 
  • Despite heavy investment in new product development, the company generates high levels of free cash flow.

We retain our Add recommendation for GBT with a share price target of A$4.97ps.

Villa World (VLW)

Villa World is an integrated residential land developer/builder delivering affordable housing across QLD and Victoria.

Reasons to buy Villa World

  • Of the small-cap developers VLW has the best placed portfolio to capture the upswing in residential volumes. 
  • VLW recently guided to approximately 6% growth in underlying earnings for FY16 - we think the group has a strong chance of outperforming. 
  • VLW's valuation is attractive at around 1 10% discount to peers and trading on an (approximately) 8% fully franked dividend yield.

We retain our Add recommendation for VLW with a share price target of A$2.83ps.

Vitaco (VIT)

Vitaco manufactures and distributes branded products within the nutrition, health and wellness industry.

Reasons to buy Vitaco

  • VIT's differentiator is its diversity across vitamins, sports nutrition and health foods including well known consumer brands. 
  • The group is targeting strong growth in exports via e-commerce channels, noting that China has 300 million active online consumers. 
  • Trading on an FY17F PEG of 0.6x, VIT looks attractively priced versus its peers (Blackmores, Bellamy's and Freedom Foods).

We retain our Add recommendation for VIT with a share price target of A$3.25ps.

More information

Morgans clients can access detailed reports on all our high conviction stock picks. If you would like more information, please contact your nearest Morgans office.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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